Kolkata, June 8,2011: 
Income Tax Department is gearing to extend its net in Sikkim. According to the Chief Commissioner I-T, West Bengal Circle (including Sikkim and Andaman & Nicobar), Mr B.S. Sondhi, for settlers in Sikkim post-1975, this year would be the first assessment year.
“The department has been working towards this goal in the State where “subjects” of erstwhile kingdom are exempt from the provisions of the Income Tax Act. We have been trying to sensitise the employers, particularly, in the private sector, towards introduction of income tax deduction at source,” he said.
Under the I-T dispensation, Sikkim residents who hold “subject certificates” and their descendants will continue to enjoy income tax exemption.

Amendment

An amendment in the IT Act kept Sikkim subjects (and their descendants) out of the purview of the statute on “income earned in Sikkim,” including income from dividends and interests on securities.
In the Finance Bill of 2008, the then Finance Minister, Mr P. Chidambaram, included an amendment to Section 10 of the Income Tax Act. According to Clause 4 of the Finance Bill, a new clause, christened 26 AAA was inserted in Section 10, under which the income of a Sikkimese individual from any income arising out of the State of Sikkim was exempted tax.
The 1989 Presidential Notification and the 1994 Act, which extended Direct Tax Laws to Sikkim, come into effect from 1990 onwards.
The I-T department was also trying to persuade local firms and commercial establishments to get registered under the national law as opposed to the old rules of the erstwhile kingdom.
A “Sikkimese” is anyone whose “name is recorded in the register maintained under Sikkim Subjects Regulation, 1961, read with Sikkim Subject Rules, 1961, immediately before 26 April, 1975; or individuals whose name is included in the Register of Sikkim Subjects by virtue of the Government of India Order No. 26030/36/90-I.Ci. of August 7, 1990 and Order of even number dated April 08, 1991; or, any other individual whose name does not appear in the Register of Sikkim Subjects but it is established beyond doubt that the name of such individual's father or husband or paternal grandfather or brother from the same father has been recorded in that Register.”
Though the legal framework provisions had been made, the Finance Ministry planned the income tax assessment year for the “settlers” from this fiscal.
sOURCE: HINDUBUSINESSLINE